Deep-pocketed investors seem to have shrugged off the ongoing diplomatic spat between the two countries, but a proposed treaty to boost bilateral trade is off the table for now
The diplomatic spat between India and Canada over the alleged killing of a leader of a separatist group has strained relations between the two nations and put a trade pact on shaky ground. Tension further escalated when, in a tit-for-tat move, New Delhi expelled a Canadian diplomat after Ottawa asked an Indian official to leave. The ongoing row casts a potential shadow on the progress of trade and investments between the sparring countries, but it hasn’t spooked long-term investors or dented their confidence. According to the government of Canada, bilateral trade between the two countries touched $9 billion last year. This is a rise of nearly 57 percent over the previous year. This is 0.7 percent of India’s total global trade. The proposed India-Canada Comprehensive Economic Partnership Agreement (CEPA) aimed to boost trade by as much as $6.5 billion in the coming years, but negotiations came to a screeching halt this month. Now, some companies and traders are wary of supply snags if the situation takes a turn for the worse. For example, the bulk of India’s imports from Canada includes fertilisers and fossil fuels, such as coal and coke, pegged at about $1.7 billion (see table). In recent years, Canada has also become India’s largest supplier of red lentils or masoor dal with imports to the tune of $370 million in FY23. Also read: India bond Inclusion in JP Morgan index may trigger $20-40 billion flow. Is it enough?